* IEA cuts global oil demand from previous forecast
* U.S. crude stocks fall unexpectedly, says API
(Updates prices)
By Farah Master
LONDON, Feb 11 (Reuters) - Oil pared earlier gains to hover
under $38 a barrel on Wednesday after the International Energy
Agency said fuel demand would contract more sharply than
previously thought.
Prices drew some support from U.S. data showing lower crude
stocks and indications the Organization of the Petroleum
Exporting Countries was determined to limit supply.
"The OPEC production cuts are beginning to feed through into
a stabilisation and even some erosion of the high stock levels,"
said Christopher Bellew, broker at Bache Commodities in London.
U.S. crude <CLc1> rose 37 cents to $37.92 a barrel by 1430
GMT, down from a session high of $38.44.
London Brent crude <LCOc1> rose 49 cents to $45.10,
stretching its unusual premium to U.S. oil prices to around $7 a
barrel.
A record supply glut in Cushing, Oklahoma, the delivery
point for the U.S. contract, has weighed on U.S. crude.
But U.S. supplies have fallen in the past week, according to
data from industry group the American Petroleum Institute
released late on Tuesday.
The figures showed U.S. crude oil stockpiles unexpectedly
fell by 1.996 million barrels. []
SLOWING DEMAND
Even though supplies are lower, the weakness of demand was a
key focus for the market.
In its latest monthly report on Wednesday, the Paris-based
IEA said global oil demand was expected to fall by 980,000
barrels per day (bpd) in 2009, down from its previous forecast
of a 500,000 bpd contraction. []
It linked the revision to the extreme weakness of the global
economy.
A slew of dismal economic data on Tuesday had dragged oil
back below the psychologically important $40 mark.
Until recently, many analysts predicted the relative
strength of the Chinese economy would help to sustain demand for
oil even though consumption has fallen sharply in developed
economies.
But on Wednesday, data from the General Administration of
Customs showed January crude oil imports to China, the world's
second-largest energy consumer after the United States, had
fallen by 8 percent to the lowest level for 15 months.
[
Leading oil exporter Saudi Arabia said current oil prices
were as unjustified and unsustainable as the record peak above
$147 a barrel hit in July last year. [ID:nN10330376]
The argument is that prices this low will limit investment
and lead to a market surge when demand eventually recovers.
"If today's low prices continue long enough, they will sow
the seeds for future price spikes and volatility," Saudi Oil
Minister Ali al-Naimi said in Houston on Tuesday.
(Additional reporting by Fayen Wong and Dharmasari Haroun in
Singapore; Editing by Barbara Lewis)
